Activist Group Claims Government Subsidized Green Energy Projects Are Worthwhile
The free-market vs. government cronyism
In a recent article in The Christian Science Monitor, two analysts from the Union of Concerned Scientists make the argument that President Obama’s investments in green technology were a good deal.
The Union of Concerned Scientists’ John Rogers, a senior energy analyst in the Climate and Energy Program, and David Friedman, the senior engineer in the Clean Vehicles Program, described the well-publicized bankruptcies of Solyndra and A123 Systems as “a few falling acorns” and call critics “Chicken Littles.”
President Obama’s green energy investments have received a lot of publicity in Michigan because four of the largest nine green companies to go bankrupt had Michigan ties.
The Heritage Foundation did an analysis of 19 bankrupt green energy companies that failed even though the government had promised financial assistance up to $2.6 billion.
Proponents of limited government say the Union of Concerned Scientists is missing the point about government investment in green companies.
“Whether the Obama Administration’s investments in clean technologies succeed or fail, the fundamental problem is that the federal government is risking taxpayer dollars to bet on companies in the first place,” said Heritage Foundation Spokeswoman Rachael Slobodien. “Regardless of their fate, the government should not be ‘investing’ in these technologies or companies, especially in the energy market where there is already ample demand and diverse supply. We should be equally infuriated about the successful companies. These are companies that have profitable products to offer and do not need taxpayer support. There is a phrase for subsidizing successful companies: corporate welfare.
"As Heritage’s Nick Loris has explained many times before, ‘Two kinds of companies seek subsidies: economically uncompetitive companies, which need the subsidy to survive, and potentially competitive companies, which use subsidies to pad their bottom lines. Neither case can be justified.’ “
Veronique de Rugy, senior research fellow at the Mercatus Center at George Mason University, said the Union of Concerned Scientists’ contention that the incentives are working because many companies are still operating is flawed.
“It’s not because the program is working. It’s because they are giving this money to large companies,” de Rugy said.
Well-established wind-farm owning corporations such as NRG ($145.5 million) and NextEra Energy ($955.5 million) received multi-millions in cash from the federal government, de Rugy wrote.
NRG had $27.2 billion in assets in 2012 and NextEra Energy had $60.3 billion in assets in 2012, according to Forbes.com.
“I’m sorry. These are big companies that could get capital without the help of the government,” de Rugy said. “That’s the real scandal.”
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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Michigan a Cigarette Smuggling Haven
Supporters of punitively high tobacco tax rates should be careful what they wish for.
According to the Mackinac Center’s latest estimate of cigarette smuggling rates, Michigan is No. 10 nationally in the proportion of cigarettes being smoked here that are illegally smuggled in. This is the third such estimate the Center has produced, and the details are disconcerting. The smuggling rate here increased 12 percent since 2009, with contraband smokes now representing 29.3 percent of all consumption.
The increasing rate of both casual and commercial cigarette smuggling over the past two decades is staggering. Casual smuggling occurs when individuals shop in lower tax jurisdictions for personal consumption. For example, a Kalamazoo smoker can easily make a run for the Indiana border to stock up on much lower-priced smokes. In 2011, such activity represented slightly more than 15 percent of the cigarettes smoked here. Commercial smuggling involves large-scale, long-distance shipments from states like North Carolina or Virginia; it supplied more than 16.2 percent of the cigarettes smoked here in 2011.
At the same time, Michigan also is an out-bound smuggling source. We estimate a quantity equivalent to 3.6 percent of state consumption was smuggled out to Canada, among other things lowering this state’s net-smuggling rate.
Cigarette smuggling is responsible for much more than just state government revenue losses. It is associated with violence, theft, counterfeited and adulterated products and government corruption to name a few.
One example of these unintended consequences involves a police officer in Maryland who actually used his official patrol car, uniform and pistol to escort illicit cigarette shipments to their destination. When smuggling profits are sky high, everyone seems to want a piece of the action and even the “watchers” need to be watched.
The top 10 smuggling import states are, New York (60.9 percent); Arizona (54.4 percent); New Mexico (53 percent); Washington State (48.5 percent); Rhode Island (39.8 percent); Wisconsin (36.4); California (36.1); Texas (33.8); Utah (31.2); and Michigan (29.4).
New York should not be a surprise. It has the highest tobacco excise tax in the nation at $4.35 per pack and New York City imposes another $1.50 on top of that. Cigarettes are undoubtedly being run in from Virginia, among other states. Virginia has the second-lowest tax rate in the nation at .30 cents per pack.
New Hampshire’s proximity to higher-tax states also makes it a significant smuggling source, with outbound smokes equivalent to 27 percent of the state market.
The conclusion from rapidly rising smuggling rates is that politicians’ addiction to higher cigarette tax revenue has created an illegal trade that is hyper-profitable for the wrong people and is generating significant negative consequences for our society.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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